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The world’s largest cryptocurrency by market capitalization exploded in price Tuesday, jumping $600 in 30 minutes to break away from what had been suppressive bear market conditions.

But entering Wednesday, bitcoin is changing hands at $7,370 and showing signs it might continue its ascent. In fact, when viewed on longer timeframes, it appears that the trend is changing, this time in favor of the always-optimistic bulls.

But just how reliable is this move?

So far, there are three general tools traders are using to analyze the markets in a quest to confirm that the change in trend will have staying power.

Tool #1: 55 EMA surpassed

Exponential Moving Averages (EMA) act like signals that provide crucial insights into the asking bid as well as the momentum behind each major move.

As such, they can be used to confirm or deny a trend change by analyzing the position of the EMA in relation to the current price. The longer the EMA, the more significant the move is as it has more data points to collect from and a greater range of price history.

Stepping back, the number 55 is a Fibonacci number that technical traders use in relation to other Fibonacci sequences including 8,11 and 21 (usually skipping 34). It can provide crucial information about the current health of a particular stock or asset, and works best when viewed from longer time-frames.

For example, from May 11 to July 16, the 55 EMA for bitcoin was above the price acting as a barrier or resistance to any major moves past $6,860 (see positioning of red EMA).

Until yesterday, the position of the exponential moving average remained unchallenged, solidifying the bearish perspective over a two-month period.

However, the recent bitcoin surge forced the EMA below the current price, confirming that the breakout is both significant and bullish in the mid-term.

Tool #2: Fibonacci extensions and retracements

Extensions and retracements are used to predict the levels of resistance and support for an underlying stock or asset. (You can use the Fibonacci tool to identify where the most likely region of major resistance or support lies).

To draw an extension for bitcoin, take the cursor to the bottom of the previous significant low (June 26) and draw it up toward the significant two month high seen May 5th.

Above is an example of specific resistances/supports where historically, they have held and broken through. Any major moves above the neutral Fibonacci extension at 0.5 would add confirmation to the bullish bias for the short term.

If however, bitcoin is unable to break that key resistance, a retracement would be more likely whereby the price would need to come down as conditions become overbought.

Prices generally retract or extend between the 38.2 percent, 50 percent and 61.8 percent Fibonacci retracement levels and are best used in conjunction with other technical indicators such as the exponential moving averages previously mentioned or trading volume.

Tool #3: Trading Volume

Another telling sign for traders is the total volume for an underlying stock or asset, so the amount of bitcoin that changed hands in a 24-hour period can be a crucial tell into whether or not the move above $7,000 is meant to last.

Above, we see how volume for bitcoin reached a 3-month high yesterday, almost doubling the day prior.

As volume increases over a general period, the price action becomes stronger as there is more liquidity and greater buy/sell opportunities to be had than in a low liquidity market.

Keep a keen eye on the volume as it is one of the greatest indicators in determining the strength of a particular move in relation to the amount traded.

Marc Lasry, the co-founder, chairman and CEO of Avenue Capital Group, an investment firm with $9.6 billion in assets under management, weighed in on his bitcoin investment on CNBC Wednesday.

Speaking during the channel’s “Squawk Box” segment, Lasry said he has invested around 1 percent of his personal fund in bitcoin, betting that the world’s largest cryptocurrency by market cap might soon be worth as much as $40,000 per coin at some point.

He noted:

“You are hoping that as it gets more into the mainstream, and as more markets end up allowing it to trade where it’s freely tradable, to me that’s more the market bet … I think you will have something that ends up being somewhere at $20,000 to $40,000.”

Lasry has an estimated $1.7 billion in his personal fortune, according to the 2018 World’s Billionaires List released by Forbes.

Although investors are betting on all kinds of cryptos, Lasry believes “the one will have the biggest market benefit is going to be bitcoin.”

“I like bitcoin because it’s the one that where everybody is going to come to,” he said, adding that the price of bitcoin will rise if the average Americans can get access to bitcoin.

One of the Wall Street’s most renowned “vulture” investors, Lasry said he has started investment in bitcoin a few years ago, but bought a lot more in the last year.

With so many people using the software amid a price boom, the fees for sending transactions swelled higher than ever before, even rising to as much as an average of $26 for a single transaction. It was a road with too many cars, leading to a veritable traffic jam.

Sure, the situation wasn’t long to last, as fees fell back to manageable levels, but the worry is this spike could always happen again – if, or dare we say it, when, bitcoin “goes mainstream.”

But fees don’t have to be as high next time there’s a spike in the cryptocurrency’s use, at least that’s the argument being put forward by those launching a new effort called Bitcoin Optech.

Led by bitcoin developer and Bitcoin Core contributor John Newbery, the effort is an attempt to help the companies that rely on the bitcoin software figure out what scaling technologies they’re missing, including those that will push fees lower.

Newbery told CoinDesk:

“Businesses were caught unawares. At the same time, there was lots of scaling tech that could have helped and that was well-understood, but they weren’t adopted yet.”

That gave him the idea that developers with knowledge of bitcoin’s underlying tech could be more aggressive in helping companies through such upgrades. For instance, the bug fix Segregated Witness (SegWit) activated last August, but bitcoin businesses were slow to adopt the change, even though it can cut fees by half.

Since it can help to improve the experience for all bitcoin users, many notable entities are interested in the effort, with investors Xapo CEO Wences Casares, entrepreneur John Pfeffer and bitcoin development group Chaincode Labs giving them the money to get the project off the ground.

The non-profit effort also boasts six member companies so far, including Coinbase, Square and BitGo, all who’ve expressed what they believe is a need for an effort like Bitcoin Optech.

“By collaborating with leading engineers in this space, we’ll be able to achieve more than we could have by tackling these problems alone,” Coinbase lead bitcoin engineer Brock Miller said in a statement. Square strategic development lead Mike Brock said the company is “proud” to be working with Optech.

Coming together

So far, Bitcoin Optech has made contact with 15 to 20 bitcoin companies, saying they’re surprised by how excited they are to adopt various scaling technologies. “They’re saying something like Optech has been missing. and could be beneficial. It’s even bringing people together,” Newbery said.

In this way, it’s also helping heal relations between the various groups that have sprung up to support the decentralized bitcoin software. In the worst parts of bitcoin’s history, a rift has emerged between developers of the Bitcoin Core protocol and the industry’s companies, with the two different groups advocating for very different technical upgrades.

“The more engagement there is between industry and open source, the better,” Optech’s announcement blog post explains.

To that end, they’ve identified a few key technologies that they can help business with right now.

Coin selection is a complicated problem dealing with the most efficient way of choosing which “coins” to send when a bitcoin users sends a transaction. Adding to the complexity, Bitcoin OpTech project manager Steve Lee stressed that the best selection technique often varies from wallet to wallet.

While “fee estimation” is another technical problem that’s hard to get right. Fee estimation tools in bitcoin wallets today often tell users they should pay fees much higher than they actually need to be paying.

Speaking about these very strategies, the Bitcoin Optech team, joined by Bitcoin Core contributor Andrew Chow, held their first workshop in San Francisco. Sponsored by Square, the event saw the developers go over some of these scaling technologies and what’s in it for the companies that adopt them.

Lee called this workshop a “good proof point” for what they’re doing in that more companies showed up than they could have hoped for. Six of the eight San Francisco companies they broached the topic to showed up at the workshop, demonstrating, in his mind, how hungry engineers at these companies are to learn about how to solve these types of problems.

“It’s hard to get their attention,” he said.

Catalyzing change

The Bitcoin Optech team stressed, though, that they don’t want to be any sort of “central authority” telling bitcoin companies what they should and shouldn’t do.

Lee said they’re looking to be more of a “catalyst” for change.

By hosting more workshops similar to the above around the world, hopefully to give engineers the tools they need to make these scaling technologies on their own.

Meanwhile, they’ve been sending out weekly newsletters describing the most recent additions to Bitcoin Core, the most popular bitcoin client. And they have other ideas too, like creating a Slack group where member companies can keep in touch.

Another example of this is they’re looking to start what Lee calls an open-source “cookbook,” detailing various scaling changes bitcoin companies can adopt.

This documentation would be available to anyone, not just dues-paying members.

All that said, there’s a focus to Bitcoin Optech’s mission: technologies that businesses can add today

Maybe someday they’ll help companies other much-hyped technologies, such as lightning or Schnorr, since many bitcoin companies need to update their software in order to support these improvements.

But Newbery said that might be a while. They’re waiting until “they’re more advanced in their proposals.” Until then, they’ll be focused on well-understood strategies that bitcoin companies have yet to adopt.

The chives growing in one crypto tycoon’s California mansion carry a hidden message.

Guo Hongcai, a beef salesman turned early bitcoin adopter from China’s Shanxi province, is one of many freshly minted millionaires funneling parts of their wealth out of the country by purchasing real estate abroad.

In April, Hongcai sold 500 bitcoin in the U.S. then used that money to buy a 100,000-square-foot mansion in Los Gatos, a 90-minute drive from San Francisco, California. His Rolls-Royce, also purchased with the fruits of bitcoin arbitrage, sits in the driveway close to a small chives garden.

“It’s very normal to sell bitcoin in the U.S. After selling bitcoin, you can just buy anything you want,” he told CoinDesk.

Guo calls this secondary residence his “Mansion of Chives,” because the vegetable is also Chinese slang for crypto investors who prove vulnerable to big sell-offs.

As Chinese regulators clamp down on industry business on the mainland, crypto millionaires are turning to foreign real estate markets to diversify their holdings. Some purchase property directly with crypto, others like Hongcai use bitcoin to gain foreign currencies without going through a bank.

According to the South China Morning Post, real estate purchased in Hong Kong doesn’t require the same taxes and documentation as other financial assets held abroad. Chinese investment in foreign real estate, often through Hong Kong brokers, has been rising for years. Now early bitcoin adopters are utilizing new wealth for familiar patterns.

“The requests we have from them start at $50,000 or $100,000 up to, the latest one was $3 to $4 million for Silicon Valley,” Natalia Karayaneva, CEO of Propy, another crypto-powered real estate marketplace, told CoinDesk.

She added:

“We’re seeing that more and more people are willing to buy properties with cryptocurrencies because it’s getting easier to get their money out of the country using bitcoin, rather than establishing a bank account based in Hong Kong and getting their money out of the country using business channels.”

Crypto hubs

According to Karayaneva, the U.S. and the U.K. are the most sought-after locations for real estate, especially fintech hubs like London or California’s Bay Area.

“They were mostly interested in residential properties next to good education, like Stanford,” she said. “Also, they want to diversify. They want to have parts of their assets abroad in more stable countries.”

So far, around half of the traffic to Propy’s website comes from China, out of 50,000 monthly views.

It’s a trend that has implications far beyond China, though, especially in California, where, according to statistics gathered over a decade by ATTOM Data Solutions, nearly a quarter of all single-family homes are now purchased in all-cash transactions without a mortgage.

According to CEO Roy Dekel at SetSchedule, a California-based startup helping licensed real estate agents connect with buyers and homeowners, it’s more common for Chinese bitcoin veterans to convert cryptocurrency into cash than to buy property directly with it.

“We have noticed a drop in Chinese interest, but certain cities like Los Angeles, San Francisco, and New York remain strong,” he told CoinDesk. “The ultra-wealthy Chinese have used this source as a diversification of investment.”

High rollers

On the other hand, Dekel also noticed “many blockchain enthusiasts” are buying second homes or investment properties, leading to an uptick in sellers interested in accepting cryptocurrencies directly from international buyers.

Since platforms like Propy are compliant across jurisdictions, the reason behind this trend may go beyond tax evasion, speaking to real pain points in legitimate markets.

In January, The New York Times asserted that China’s exorbitant housing market is “like a casino.” Further, Reuters reported property development restrictions continue to tighten, such as reduced subsidies for housing developers.

“In Beijing, only last year they saw a 40 percent rise in price,” Karayaneva said. “Historically, real estate investors from China are very active abroad because their own property market is going crazy.”

All things considered, Chinese buyers are hardly the only ones purchasing property with cryptocurrency. In 2017, Europeans used bitcoin to buy luxury apartments in Dubai’s Aston Crypto Plaza, a project spearheaded by British Baroness Michelle Mone.

Wherever it’s taking place, though, it has become increasingly clear that crypto wealth could have a real impact on global real estate patterns.

Sure, a technical analyst can perform just fine with an understanding of candlestick patterns, support and resistance levels – but if you could add one more weapon to your trading arsenal, wouldn’t you?

If you answered yes, then welcome to the world of supplemental indicators, namely the relative strength index (RSI) – one of the most widely used technical trading tools.

The indicator is used to help identify when an asset’s price is too far from its “true” value and hence allows a trader to take advantage before the market corrects itself. With the help of RSI, traders are more likely to get a great trading entry, which makes it an invaluable tool for trading the volatile cryptocurrency markets.

Unfortunately for the 18th-century candlestick charting pioneers, the RSI was developed just 40 years ago by technical analyst Welles Wilder. The momentum indicator uses a somewhat complex formula to determine if the asset is overbought or oversold.

Luckily, you don’t need to know what the formula is or how it works in order to benefit from the RSI.

For the overachievers, here’s it is:

RSI = 100 – 100 / (1 + RS)

RS = Average of X periods closes up / Average of X periods closes down

X = Recommended to use 14, but can be a number of the trader’s choosing

The formula returns a value between 0-100 which is represented on the chart in a wave-type pattern known as an oscillator.

An asset is considered undervalued or “oversold” and due for a corrective rally when the RSI drops below 30.00. On the other hand, buying pressure usually subsides after the RSI prints above 70.00, indicating overbought conditions.

The best part about the relative strength index is that it’s reliable, and the proof is in the charts.

How to Use the RSI

Overbought

The RSI can help identify when the asset will cool off, if for just a brief period.

This point in time is reflected by overbought conditions in the oscillator. The higher the RSI goes above 70.00, the more overbought the asset is and deeper could be the pullback in prices.

The above daily chart for ether (ETH), the cryptocurrency that powers ethereum, showcases six occasions when the RSI signaled overbought conditions.

In the following days or weeks, price declined between 15 and 59 percent, 100 percent of the time. Overbought conditions are ideal times for a trader to take profit on his/her position or close it entirely.

Those willing to take the risk of making money on the way down could even open a short position.

Oversold

The RSI can also signal when the plummeting price may reach exhaustion by returning an “oversold” value. The lower the RSI goes below 30, the more oversold the asset is and the stronger could be the turnaround in prices.

As seen in the daily chart above, the RSI dipped to or below 30, signaling oversold conditions four times in roughly 11 months and each time bitcoin responded by rallying 22 to 83 percent gains in the subsequent days.

Granted, RSI is not the holy grail of markets, however, the chart above shows the indicator produces good signals more often than not.

Key Takeaways

A quick rally to the upside tends to occur after a severe price drop, known as an “oversold bounce.” Using the RSI to time trade entries during an oversold bounce is one of the most effective ways to make a profit on the intra-day time frames.

Don’t wait for the RSI to reach 0 or 100 – it almost never happens. Values over 85 or below 15 represent extreme overbought/sold conditions.

A divergence occurs when the RSI moves in the opposite direction of the price. A bullish divergence occurs when the RSI makes a higher low while price sets a lower low. This is generally a strong indication that a price bounce is coming. A bearish divergence occurs when the RSI sets a lower high while price sets a higher high and suggests the buying momentum is nearing its climax.

Wednesday saw another $30 million worth of digital currency stolen from the exchange Bithumb, causing another dip in the market. The price of bitcoin dropped from around where it is now, $6,770, to $6,402 in less than four hours. However, when compared to previous breaches in exchange security, the market has responded with far more resilience than it has in the past.

Much of the damage was mitigated by the fast actions taken by the exchange itself. As soon as the hack was reported, Bithumb suspended all crypto trades and moves all of the remaining funds into cold storage servers until the breach could be patched. This allowed technicians to work quickly without having to worry about compromising the other funds in the system after they had been moved.

The decisive actions taken by the company are what saved the market from taking another deeper dive once the news started to pour out about the breach. Usually, any time there is a big hack it makes people incredibly uneasy and usually signals them to take their funds out of the market. This time, however, Bithumb had a contingency plan. Having stored up a significant amount of reserve funds in the exchange accounts, the company immediately paid back any investor money that had been stolen.

Charlie Lee was on Fast Money explaining that the strong fundamentals of bitcoin are what in fact saved the coin in the face of these recent security breaches on exchange platforms. He also mentioned the fears people have had about cryptocurrency fundamentals with coins like TetherUSD which is meant to be pegged directly to the price of the US Dollar but has shown some evidence that there may have been manipulation.

“The past few years people have been scared that Tether has been printing their Tether coins out of thin air and buying bitcoin with it, which might be the cause of last year’s run-up. And if they actually do have the USD backing that means that the run-up is created by real demand and not fake demand. That’s really good news.”

He compared it to how if a bank had gold stolen from its vault, the value of the gold would not change drastically after it has been stolen. And while the price of bitcoin did drop a few hundred dollars in the hours following the hack, it has now regained the lost ground and has progressed even closer to the $7,000 mark.

Since its inception, the goal of cryptocurrency has been to supplant fiat currency not just on a local or national level, but on a global scale. The ability to fully secure an entire financial system on a blockchain would allow for faster transaction times, lower fees, and better record keeping since additions to a blockchain cannot be altered without modifying the rest of the chain proceeding it.

The tech start-up, Circle, has big plans to make that crypto-only future a reality. CEO of Circle, Jeremy Allaire, said in an interview with CNBC that:

“Our view is that all fiat currency will be crypto. It seems inevitable at this point.”

The start-up is based on a blockchain application that allows users to send money to each other for free almost instantly. One of their other services includes the ability for Circle users to trade bitcoin and Ethereum in an over-the-counter platform, filling a niche for institutional investors to occupy in a market where most people are forced to trade crypto through highly centralized exchanges.

Circle proposes a “stablecoin” which will be pegged to the USD and act as a cryptographic analog to the fiat currency, deriving one hundred percent of its value from the current value of the cash backing it. Coins like this have been proposed before, like Tether USD, which has come under fire recently with its connection with the Chinese exchange Bitfinex and its possible effect on the market in the last quarter of 2017.

An issue with these so-called “stablecoins” is that they are centralized by default. One authority has control over the supply and therefore can control the value by adjusting the circulating supply which is essentially the fiat system. What a stablecoin neglects to include is the most valuable aspect of cryptocurrency: decentralization.

By just creating coins that are pegged to fiat currencies, it undercuts the incredible changes cryptocurrency could bring to the global financial system through redistributing control of the currency across the entire market instead of being controlled by a central bank or company. Until decentralized coins like bitcoin or Ethereum are adopted and used at a level closer to that of fiat cash, the volatility of these cryptocurrencies will remain high. Eventually, the few issues that do arise from the shortcomings of decentralization will be solved through future developments. Until then, however, these pegged “stablecoins” might be the stepping stone that is needed to transition the world into a system more heavily reliant on cryptocurrency and blockchain technology.

The Bank for International Settlements (BIS) has released a report on the cryptocurrency market with scathing criticisms of Bitcoin and coins like it, suggesting that they are no better than baseball cards: utterly without value if no one wants them. The report included a list of other shortcomings like the difficulty at which cryptocurrencies scale themselves, as well as the openings in the regulatory framework, which have been used to commit fraud and manipulation in the market.

BIS also made sure to point out the other consequences of using cryptocurrency including the strain on the environment that the mining of new bitcoin has created. A process that uses more energy in a year to run the bitcoin blockchain than used by the nation of Chile. While these are legitimate issues with the bitcoin system as it stands right now, one thing that the BIS included as a shortcoming of the system is the fact that it is decentralized, citing that fact as the main drawback to the cryptocurrency system.

Being the bank that operates between other central banks, it is no surprise that the BIS would want to do everything it can to paint bitcoin as an inefficient, dangerous, and worthless currency. A very telling piece of evidence for the tone of this report can be found in their biased explanation as to why the bitcoin blockchain is a threat to financial stability. Going as far as even suggesting that the bitcoin blockchain could threaten the Internet itself if it were to grow beyond a certain point. A baseless statement, which highlights either a serious lack of understanding or the naked desire to force cryptocurrency into submission.

“Trust can evaporate at any time because of the fragility of the decentralized consensus through which transactions are recorded […] Not only does this call into question the finality of individual payments, it also means that a cryptocurrency can simply stop functioning, resulting in a complete loss of value.”

First, the ‘fragility’ in a decentralized network only becomes an issue when it is forced to interact with a centralized network, creating a weak point in the system that bad actors can exploit, like cryptocurrency exchanges. There is also the fact that a decentralized ledger ensures that data is uploaded, recorded, and stored permanently on a blockchain at the time of their completion, which can never be altered. This makes that last statement about how decentralized systems call into question the ‘finality of individual payments’ a bit of non sequitur.

Like every other institution that has come out against the blockchain revolution, the BIS has shown its hand in trying so desperately to paint the cryptocurrency market in an unflattering light. The report also included how cryptocurrencies and blockchain systems do still show promise in other fields like small cross-border transactions and has all but relegated the technology to the small scale out of fear that it will threaten the position of centralized banking in the global economy.

One of the most difficult things to explain to people who are unfamiliar with the cryptocurrency market is defining what exactly a cryptocurrency is in a financial context. Bitcoin, for example, is an instrument that can be used as cash, traded on exchanges, and could even be treated as a store of value, provided the volatility gets reigned in. However, it has fallen under the regulations of the Securities Exchange Commission which has regulations that help govern the market but they were not designed for bitcoin, ether, or any other cryptocurrency that is not really a true security.

Securities are seen as shares in a company that can be traded and can appreciate or depreciate in value based on the valuation of the company at large. Bitcoin, on the other hand, is not a share in a company, it is a stand-alone coin that derives its value from the cost it takes to mine and issue the coin as well as the value based on the demand for it.

Legally, the issue has been deciding how to proceed in regulating the cryptocurrency market when some people consider bitcoin and ether to be securities and believe they can be regulated effectively under those rules. But we have seen how desperately the cryptocurrency market needs a strong regulatory framework if it has any hope of becoming more mainstream and stable than it has been historically.

The director of the SEC’s Corporate Finance division, William Hinman, said of cryptocurrencies and the current issue of distinguishing them between assets and securities:

“Can a digital asset originally sold in a securities offering eventually be sold in something other than a security? How about cases when there’s no longer a company involved? I believe in those cases the answer is a qualified yes.”

Hopefully, this new distinction between cryptocurrencies being assets and not true securities will help bolster the regulatory development and give lawmakers a clearer image of what exactly they are trying to legislate. Unless they are able to make sense of the market and its functionality, any regulations coming out to support cryptocurrency may be rife with unintended negative consequences.

Bitcoin has continued taking losses over the past week and has now edged closer to breaking below the $6,000 mark. A price that many analysts are considering to be the new lower support level of BTC’s valuation. What makes things worse, is with every new piece of negative news, with companies coming under investigation for potentially manipulating the price of the top cryptocurrency late last year with the help of another cryptocurrency called Tether. There is some evidence to suggest that the Bitfinex exchange kept trading after cutting ties with the appropriate banking institutions and began operating in a legal grey area.

This issue is made worse by the lack of very many positive news stories coming out of the community. Scams, hacks, thefts, and bearish sentiments have created an atmosphere of negativity, which has caused many holders of the coin to want to sell. According to the Oanda Corp senior market analyst, Craig Erlam,

“There doesn’t seem to be as much hype or positive news. Every time we get a negative news story now – after a period of consolidation – we don’t see bullish sentiment come in to support it. It’s almost as if people are waiting to sell it.”

It seems that the larger public has lost their interest in the blockchain and cryptocurrency space. The mainstream media has not been covering it like they were at the end of 2017 when the price was booming. This leads me to believe that the ominous effect the media coverage has on the market is what determines the reaction from the public, instead of the public’s reaction creating the news.

Hopefully, if bitcoin does end up falling back below $6,000 then it will trigger many investors to buy back in at lower levels. That is, I there is something for them to look forward to and see the potential of their investments at the lower levels, otherwise, the possible criminal activity by Tether, Bitfinex, and other actors could drive more people away from this market and squander the potential for real growth.

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